Real Estate Information

We are now 1/3 of the way through 2011 and at least the question of the tax credit effects are answered in spades. Last year the tax credit to buy a home expired  on April 30^th and as you can see by both the pending sales (down 30% ) and closed (down 20%) can leave no doubt in any one’s mind to question of “if you give people $8,000 to buy a house will they?” Of course any time you take an action the law of physics demands that a complete an opposite reaction will occur. So now the market gets to experience the withdrawal of the tax credit support. When you consider both price decline and the increase in size of home purchased through April of both 2010 and 2011 you see an approximate 6% decline in the sales price of homes. I would suspect that as we move away from the market effects of the tax credit pending sales year over year will approach parity, yet closed sales over all for 2011 will probably by off by about 10% by the end of the year.

With interest rates and prices where they stand if you are thinking of buying and planning to stay put for 5 years, my belief is you will be better off than renting since the rental market is tightening both in Yellowstone County and the nation and a tight rental market will drive rents up over the next one to five years. Comparing the average payment for the average sales price home with taxes and insurance (about $1,237per month) to the average asking price for a three bedroom home with a garage at an average rental price of $1,157 you can see what I mean.

The new construction housing numbers, in the main stream media, were pretty much ignored yesterday when they came out. But fear not I did not miss the release. The only real positive take away from the numbers is the longer building remains dormant or, if your builder dead and buried, the housing market can and will absorb the excess inventory and through natural shrinkage of exiting supply and growth in household formations the market will recover. The housing market had been on one hell of a binge and the recovery is and will be a slow and painful progression to health.

First the permits both single and total permits issued. Just to show I really am an optimist I changed my chart examining the percentages of movement to include comparisons to include how far the numbers have bounced from the bottom because ,yes, I believe a bottom has been hit, yet when you fall fifty stories the sudden stop tends to make you take a while to recover from the fall.

The housing numbers I think show the government intervention in housing has been a total failure.  In every recession in the past fifty years (a total of 8) housing permits and starts began recovering before the recessions was “officially” declared as over(except this past recession). We are now just shy of two years since the “official” end of the recessions has been declared and housing is  about 60% off its fifty year average. Even if you use the five year average which includes the lowest numbers new construction housing is down about 45%.

A thought for you to ponder………. ask yourself if your income was running 45% below the last five years how would you be getting along?   

 Total permits includes multifamily

Total single family starts

Total housing starts includes multifamily

I think if these charts were showing the monitoring of your heart beat in the hospital they would be calling for the crash cart to try and revive you

In order to enjoy a day of skiing in the winter you need a slope so gravity can work its magic and pull you down the slope. I thought skiing was an appropriate analogy for how we are performing so far this year. The information is current as 4/12/2011

First looking at the percentage of the market by price range the two thing of  note are #1 the high end by number of sales, except for the year 2009, are remaining constant as a share of the market. This should not be a surprise since historically low interest rate and more advantageous pricing would be a call to action for the smart money. # 2 the 400k to 500k shows a 66% percent drop in percentage of the market, this indicates how hard the changes in financing have affected what I call the “debt rich” those individuals who thought since a lender would approve them they could purchase above their means. Along with the drop in the 400k to 500k range the 30% increase in the percentage of the market in 300k to 400k range. shows all the “debt rich” removed from the market and the price movement down to attract value buyers that actually have means to purchase, so the market is behaving in its normal rational way responding to supply and demand.

Next we look at the price per square foot of properties sold and we can see the continuation of gravity at work. One very important cautionary notes, looking solely at price per square foot is a dangerous way to value any individual property since there are so many variables in condition and location, yet as an overall market indicator it allows insight into overall direction and a confirming indicator of the average and median sales price movements.

 Then we look at average and median sales price received. Taken as whole by themselves an indicator of the overall strength of the market. As a commentary what I would say is, All real estate is local, All news is national, yet we in Yellowstone county are neither a walled city nor an island. In 2009 Yellowstone county had approximately a net in migration of 1400 people what that translate to in turn over, when you look at the out migration, is approximately 5000 new people into the county coming from all points. This assures us that whether we like it or not we are intimately intertwined with the national real estate trends.

then the comparison of  inventory levels to pending sales you can see the influence of the tax credit last year. The positive I believe is that after the cliff dive at the ending of the tax credit the market stayed in a relatively narrow range indicating a balance of inventory and sales it appears that is occurring or continuing into this year’s selling season that is good because it moderates the pitch of slope and instead of the market going into the expert skiing slope decline we should hopefully stay on the bunny slope or worst case the immediate slope to skiing the markets decline.

Well it has been an interesting start to the year, with the most interesting dealing with the blue screen of death on my main computer this week. No matter how I measure the results at the end of the first quarter  the market declined in value between 5 to 6%. Closed Sales are down 14% and single family permits issued by the city of billings are off 49% for the 1^st quarter. The positives are inventory is down about 6%, foreclosure notices are holding steady in the mid to high teens per week, after a brief rise right at the first of year, most probably due to the halt to review procedures at the end of 2010. The bright spot in the real estate market is the ownership of rentals, availability is declining so rents are firming and will be rising toward late summer early fall.

Open Sunday, April 3, 2011   1-3PM

210 Monarch Street - $154,900

Located off Hallowell Lane in Chrysalis Acres

There is something to please everyone in the family in this tastefully decorated and squeaky clean home.  3 bedrooms, 2 baths, garage, fenced yard, custom kitchen with appliances, come and take a look!

 new single family housing is tied to two things #1 employment and #2 the elimination of foreclosure inventory overhang. Thanks to all the programs that did not work in solving the foreclosure problem, just delayed and extended, we will be dealing a weak housing segment of probably another two years minimum nationally.

Open House 1-3 P.M.

Sunday, March 20, 2011

2943 Boulder Avenue

Spacious 5 bedroom, 3 bath home, 2 family rooms, storage, large modern kitchen, fireplace, storage, 2 car garage, fenced yard and more!  $229,000

Open House, Sunday, March 13, 2011

1-3 PM

210 Monarch Street

Like new home with so many special features, 3 bedrooms, 2 baths, family room, garage, fenced yard, storage, a real delight.  Take a look!  $154,900

THE FIRST TWO MONTHS OF THE NEW YEAR ARE GONE. TIME TO GIVE OUR LOCAL MARKET JUST A TAD MORE THOUGHT. GONE ARE THE TAX CREDITS FOR EVERYONE, GONE IS THE 4% 30 YEAR MORTGAGE OF LAST SUMMER. MY COMMENT ON MORTGAGE RATES 4.75% TO 5.25% FOR A 30 YEAR MORTGAGE, MAKE IT INCOMPREHENSIBLE THAT ANYONE WOULD HESITATE TO BUY BECAUSE OF RATE, YET THAT CONVERSATION HAS TAKEN PLACE MANY TIMES.                                SO NOW THE QUESTION BECOMES STRENGTH OR WEAKNESS, WHICH TYPE OF MARKET DO WE HAVE. DEPENDS ON WHICH QUESTIONS YOU ASK YOURSELF. ON THE FACE OF INVENTORY BEING DOWN YOU MIGHT SAY STRENGTH, YET CLOSED AND PENDING SALES ARE DOWN YOU SAY. SO LETS LOOK AT SALES PRICE BOTH AVERAGE AND MEDIAN SHOW THEY ARE UP YOU SAY , YET WHEN YOU LOOK AT THE COST BY SIZE OF HOME YOU BUY WITH MONEY YOUR COST IS DOWN. BOTTOM LINE WHAT ALL THESE CONFLICTING  INFORMATION SAYS TO ME, WE AR A MARKET IN TRANSITION AND UNFORTUNATELY FOR MY FRIENDS IN BUILDING BUSINESS THEIR CUSTOMERS ARE GOING TO SCARCE THIS YEAR AND REMAIN SO UNTIL A STRONG BUILDING OF EMPLOYMENT IN YELLOWSTONE COUNTY, MEANING NEW CONSTRUCTION WILL REMAIN WEAK.IT CAN NOT COMPETE WITH THE RESALE MARKET FOR SIZE AND FINISHED AMENITIES, IT DOES OFFER THAT NEW HOME SMELL BUT THE CUSTOMER WILL REALLY NEED TO WANT NEW FOR THE PRICE DIFFERENTIAL. THE RESALE MARKET WILL CHUG ALONG PEOPLE ARE ALWAYS MOVING AROUND, FAMILIES GROW, FAMILIES SHRINK, PEOPLE MOVE INTO TOWN PEOPLE MOVE OUT OF TOWN.  BELOW THE MARKET UPDATE AT GLANCE ARE SEVERAL PERTINENT GRAPHS FOR MARKET PERFORMANCE FOR COMPARISONS.

Open House Sunday, February 27, 2011

1-3 PM

1017 Wyoming Avenue

Come home to this home!  Conveniently located ranch style home features 3 bedrooms, 2 baths, family room, bright & light living room area, dining room, convenient kitchen arrangement with appliances, fenced yard, patio, garage, storage.  Stop by and take a look today.   $150,000